Interim Report January-June 2011 (English summary)
Highlights Q2/2011
* Revenues Q2 KSEK 39 188 (-) and H1 KSEK 64 909 (-)
* Operating result Q2 KSEK -11 509 (-50 624) and H1 KSEK -15 684 (-55 687)
* Profits after tax Q2 KSEK -6 200 (-53 114) and H1 KSEK -11 675 (-61 687)
* Earnings per share Q2 SEK -0.08 (-0.72) and H1 SEK -0.07 (-0.84)
* First loan repayment, MSEK 7.6, made on the bank loan financing the Pampalo
Gold Mine.
* Production progressed according to schedule during the quarter, and the
plant is now operating at its planned capacity.
Subsequent events
* A cave-in occurred on July 28(th) in the high-grade southern ore body. This
will have a limited effect on short-term production tonnage as production
will be increased in other areas of the mine.
* Endomines maintains its gold production target of 550-600 kg (17 700-19 300
oz) for 2011.
* A recent revision of the Karelian Gold Line production plan resulted in a
lowering of the production target of 900-1000 kg gold per annum by
approximately 10%, to 800-900 kg gold per annum.
* The Board of Endomines has taken the decision to carry out a feasibility
study on increasing processing capacity at Pampalo in order to achieve
higher gold production levels
Key financial figures
Results Q2 vs Q1 2011 Q2 Q1 H1
KSEK 2 011 2 011 2 011
Revenues 39 188 25 721 64 909
EBITDA -4 214 -1 727 -5 941
EBIT -11 509 -4 175 -15 684
Profit before tax -8 753 -6 414 -15 167
Net result -6 200 -5 475 -11 675
Earnings per share -0,08 -0,07 -0,15
Cash flow before financing 14 729 -31 283 -16 554
Results 2011 vs 2010 Q2 Q2 H1 H1
KSEK 2 011 2 010 2 011 2 010
Revenues 39 188 - 64 909 -
Operating cost -50 697 -50 624 -80 593 -55 987
EBIT -11 509 -50 624 -15 684 -55 987
Net finance cost 2 756 -3 465 517 -7 152
Profit before tax -8 753 -54 089 -15 167 -63 139
Total cash flow for the period 14 729 -52 995 -16 554 -96 006
Cash at end of June 2011 and end of December 41 594 65 733
2010
Business Area Pampalo Gold Mine
Pampalo Gold Mine Q2 Q2 H1 H1
KSEK 2 011 2 010 2 011 2 010
Revenues 39 464 - 65 307 -
Operating Result 6 010 - 6 215 -
Investments 291 - 1 595 -
Key production indicators[1]:
Q1/2011 Q2/2011 Jan-Jun 2011
Tonnes mined 25 382 44 050 69 432
Tonned processed 35 797 53 169 88 966
Head grade (Au g/t) 3.5 3.1 3.3
Hourly utilization 63.4 90.5 88.2
Recovery (%) 83.8 87.0 85.2
Gold produced (kg) 105.4 144.7 250.1
Gold produced (oz) 3 390 4 651 8 040
LTIFR (12 month rolling) 39.7 50.0 50.0
Production progressed according to schedule during the quarter, and the plant is
now operating at its planned capacity.
There was one Lost Time Injury during the quarter, resulting in one day of sick
leave. The number of personnel at the Pampalo Gold Mine at the end of the
reporting period was 55 own, 25 contractor employees and 10 short-term seasonal
substitutes.
The Cash cost[2] for the period Q2 was 919 USD/oz and for H1 2011, 1 006 USD/oz.
For Q1, the cash cost was 1 136 USD/oz. During the ramp-up period, the cash cost
for the Pampalo Gold Mine will remain over the planned long-term cash cost
level.
Underground mine production suffered from a lower than expected gold grade due
to excess waste rock dilution in late May-June. The excess waste rock dilution,
combined with a necessary guarantee repair on the 45-kV power line, scheduled
for August, resulted in Endomines lowering its gold production guidance for
2011 to 550-600 kg (17 700-19 300 oz) on July 6(th.)
Following the Q2 reporting period, a cave-in occurred on July 28(th) in the
high-grade southern ore body. This stope was scheduled to be in production in
late September. The incident incurred no injuries to personnel, but destroyed a
recently acquired cable bolt rig. The rig is fully insured and will be replaced.
Pending delivery of the replacement rig, Endomines will be using outside
contractors.
The cave-in incident will have a limited effect on production tonnage during
2011, as the ore planned to be mined from the cave-in area will be replaced by
increased production from other areas of the mine and the ore stock pile.
Endomines maintains its gold production target for 2011 as per the press release
issued on July 6th, 2011, of 550-600 kg (17 700-19 300 oz).
The company has engaged leading independent mining consultants, Golder
Associates (UK) Ltd, to conduct a full review of the incident and current mining
principles in the affected area and on how best to secure safe and feasible
mining of this ore body going forward.
The planned power line repair took seven days in August, and included changes of
approximately 20 power line crossbars and a few pylons which had been deemed to
be too weak for long-time usage in the line corners. This was a guarantee
repair for which the suppliers carry the full cost.
Business Area Gold Exploration
Gold Exploration Q2 Q2 H1 H1
KSEK 2 011 2 010 2 011 2 010
Revenues - - - -
Operating Result -592 - -619 -
Investments 2 669 - 3 238 -
Airborne low-altitude geophysical survey and exploration drilling commenced in
May-June, as scheduled. During the period, exploration drilling has concentrated
on areas in the vicinity of the Pampalo Gold Mine. A total of some 1 405 meters
of the planned 9 000 meter campaign for the year 2011 have been drilled. A
surface diamond drilling campaign was carried out north of the northern ore body
in June. A total of 9 holes were drilled to investigate the continuation of a
mineralized zone (9.5 m along the core grading 4.6 g/t gold) intersected by a
hole drilled in the 1990's. Some visible gold was observed in the drill-cores
from holes underneath the old intersection, but assay results are pending.
Endomines initiated a regional Environmental Impact Assesment process over the
Karelian Gold Line deposits. The work was contracted out to Linnunmaa Oy. The
program is a preparatory step prior to seeking environmental permits for the
Karelian Gold Line satellite deposits.
In addition, Endomines submitted 53 new claim applications on the Karelian Gold
Line and 9 claim applications at Kivimaa during June, prior to the new mining
legislation in Finland becoming effective as of July 1(st).
Business Area Industrial Minerals
Industrial Minerals Q2 Q2 H1 H1
KSEK 2 011 2 010 2 011 2 010
Revenues - - - -
Operating Result -103 - -185 -
Investments - - - -
Endomines continued to work on strategic alternatives for its Industrial
Minerals assets.
Corporate
Cash flow Q2 Q2 H1 H1
KSEK 2 011 2 010 2 011 2 010
Cash flow before change in net working capital 4 231 -5 764 1 408 -14 496
Change in net working capital 13 456 -1 356 -13 131 864
Cash flow from operations 17 687 -7 120 -11 723 -13 632
Investments and other -2 958 -45 875 -4 831 -82 374
Cash flow before financing 14 729 -52 995 -16 554 -96 006
Cash flow from financing -7 636 38 973 -7 955 38 973
Total cash flow 7 093 -14 022 -24 509 -57 033
Cash at end of period 41 594 80 068
Cash flow
Total cash flow for Q2 2011 was 7 093 KSEK. During this quarter, Endomines made
a first scheduled loan repayment amounting to total 7 636 KSEK. In addition the
company received 4 466 KSEK as final payment for the government investment
grant.
Total cash flow for H1 2011 was -24 509 KSEK mainly due to working capital
increase. Gold sales are paid in average 60 days after month of delivery. Total
cash at end of June 2011 amounted to 41 594 KSEK compared to 65 733 KSEK at the
beginning of the year.
Gold price hedge
Endomines has hedged the gold price for 84 400 troy oz of its deliveries
starting from Q3 2011 until end 2015, or 4 1/2 years forward, as from July
2011. The hedged price is 843 EUR per troy oz. The hedged volume represents
approximately 50% of the planned production for the five year period 2011-2015.
The first two quarters in 2011 were unhedged.
Due to the increasing gold price since the inception of the hedge (Dec 2009)
combined with the change in the EUR/USD rate, the market value of the hedge has
deteriorated, and amounted at the end of June 2011, to approximately -188.3
MSEK. The market value at the beginning of the year was approximately -195.2
MSEK, giving a positive total effect of 7.0 MSEK, of which 9.0 MSEK was charged
to operating result, 18.9 as income from cash flow hedges and -2.9 MSEK as
translation differences reported under "other comprehensive income".
During the second half of 2011, the hedge will decrease reported revenues by the
price difference between the average market price (in EUR) and the hedge price.
The hedged volume for H2 2011 is 9 000 troy oz, or 4 500 troy oz per quarter.
Sales above this volume are at market price.
The whole hedge program is described under note 7 in the full Interim report, in
Swedish.
General corporate
Work continued with a view to preparing Endomines' application to list on the
main market of NASDAQ OMX Nordic Stockholm. The application is now expected to
be submitted during Q4/2011.
Outlook
Despite the disturbances to production described above, Endomines maintains its
production target for gold for 2011, of 550-600kg.
The previously reported long-term production target of 900-1000 kg gold per
annum was based on an earlier ore reserve estimate which was revised in
September 2010. This new estimate, which was prepared using a lower "cut off"
grade, resulted in a longer life of mine, a significantly higher ore reserve and
higher gold content, but also a lower gold grade. A recent revision of the
Karelian Gold Line production plan resulted in a lowering of this production
target by approximately 10%, to 800-900 kg gold per annum.
The Board of Endomines has taken the decision to carry out a feasibility study
on increasing processing capacity at Pampalo in order to achieve higher gold
production levels.
Negotiations with gravimetric concentrate end-user refineries are ongoing. All
produced gold so far has reported to the flotation concentrate and has been sold
to the Boliden Harjavalta Smelter.
CEO statement
Despite the recent cave-in incident at the Pampalo mine, we can be satisfied
with the progress of the Pampalo production ramp-up phase, which has been mainly
completed during H1/2011 as originally planned.
Ground conditions in the upper part of the mine, and especially in the southern
ore body, are more challenging than what was anticipated by the company and
external specialists when finalizing the study for the project. This area was
subject to test mining in the 1990's, and over the 10-year period, the rock mass
below the old test mining area has deteriorated more than expected.
Immediately following the cave-in, Endomines hired leading independent mining
consultants, Golder Associates (UK) Ltd, to conduct a full review of the
incident and its impact on mining principles, especially in the upper part of
the mine, where we have faced difficulties with rock mechanics.
We are now opening a new mining panel starting from the level +375 upwards, and
this will be in production after a few months. As ground conditions appear to be
better as one goes deeper into the mine, we do not expect rock mechanical
difficulties to prevail.
We are satisfied with the Pampalo processing plant ramp-up. During the reporting
period, the plant processed 53 000 tonnes of ore and has now achieved its
planned annual capacity of 230 000 tonnes. The hourly feed has remained at
28-30 tonnes of ore per hour (versus a planned 32 t/hour), but this has been
compensated by a good plant utilization rate. During the scheduled maintenance
shutdown in August, grinding mill pump motors will be replaced by larger ones,
with a view to increasing hourly capacity to at least 32 tonnes/hour, or above.
Overall, despite the initial problems described in one specific area of the
underground mine, I am confident that Pampalo is now on the way to be a mine
with a long life-time and a prosperous future.
[1] Production figures are final and based on the assay exchange procedure
between Boliden Harjavalta Oy and Endomines Oy, Pampalo Gold Mine.
[2] Endomines calculates "Cash cost" per ounce figures using the guidance issued
by The Gold Institute Production Cost Standard. Direct mining, ore processing
and site administration, and off-site smelting and refining costs are included
in the "Cash cost" calculation, but amortization, stock change, reclamation,
capital and exploration costs are excluded. The "Cash cost" is calculated per
payable ounces. The "Cash cost" figure is given to provide additional
information and is a non-IFRS measure. Conversion from EUR to USD is made by
using the average exchange rate for the period, of 1.44, and 1.40 for H1 2011.
A full interim report (in Swedish) is available on the Company's website.
For further information, please contact:
Markus Ekberg, CEO of Endomines AB
tel. +358 40 706 48 50
Or visit the Company's website atwww.endomines.com
About Endomines AB
Endomines AB is a Nordic mining and exploration company with its first operating
gold mine in production since February 2011. The mine is located in Eastern
Finland, on the Karelian Gold Line, a 40 km long gold critical belt, where
Endomines controls all currently known gold deposits
The company has several other gold and industrial mineral properties at various
stages of development. All Endomines' mineral assets are located in Finland,
which is politically stable, has a highly developed infrastructure and is ranked
as one of the most favorable jurisdictions for the mining industry.
Endomines aims to increase shareholder value by developing its strong portfolio
of assets, as well as exploring new deposits on the Karelian Gold Line and in
Finnish Lapland. The company will also consider new opportunities and
acquisitions for further growth.
The company's business practices and mining operations are based on sustainable
principles and on minimizing the impact on the environment.
Endomines applies SveMin's & FinnMin's respective rules for reporting (public
mining & exploration companies). It has also chosen to report mineral resources
and ore reserves according to the JORC-code, which is the internationally
accepted Australasian code for reporting ore reserves and mineral resources.
Endomines applies International Financial Reporting Standards (IFRS) as approved
by the European Union.
The shares of Endomines AB are quoted on the First North Premier segment in
Stockholm under ticker ENDO.ST. Erik Penser Bankaktiebolag acts as Certified
Adviser and Liquidity Provider.
Read more about Endomines on www.endomines.com
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This news release may contain forward-looking statements, addressing future
events and conditions which are subject to various risks and uncertainties. The
Company's actual results, programs and financial position could differ
materially from those anticipated in such forward-looking statements as a result
of numerous factors, some of which may be beyond the Company's control. These
factors include the availability of funds, the timing and content of work
programs, results of exploration activities and development of mineral
properties, the interpretation of drilling results and other geological data,
the uncertainties of resource and reserve estimations, receipt and security of
mineral property titles, project cost overruns or unanticipated costs and
expenses, fluctuations in metal prices, currency fluctuations and general market
and industry conditions.
Forward-looking statements are based on the expectations and opinions of the
Company's management on the date the statements are made. The assumptions used
in the preparation of such statements, although considered reasonable at the
time of preparation, may prove to be imprecise and, as such, undue reliance
should not be placed on forward-looking statements
[HUG#1538523]
Endomines AB Press Release, Summary Interim Report January-June 2011
| Source: Endomines AB
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